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Private Company Council selections expected this month

A new system for creating exceptions to U.S. GAAP for private
companies will move forward with the selection this month of members
of the Private Company Council (PCC).

During an informational webcast conducted Friday, FASB said the
agenda for the Financial Accounting Foundation (FAF) includes a
September date for PCC selections. FASB staff members said that more
than 100 candidates were nominated for the PCC, whose members will be
appointed by FAF, which is FASB’s parent organization.

The PCC will consist of nine to 12 members, including a chairman.
The agenda calls for the PCC to meet for the first time in the fourth
quarter. The PCC will be charged with identifying, deliberating, and
voting on proposed exceptions and modifications to existing U.S. GAAP
for private companies. The PCC also will be FASB’s primary adviser on
private company issues as new standards are developed.

Exceptions created by the PCC are subject to endorsement by a simple
majority of FASB members as well as public comment and due process
procedures. If FASB does not endorse a PCC exception, it must provide
written notice to the PCC and describe changes that could result in endorsement.

Sue Cosper, FASB’s technical director who participated in the
discussion, predicted during the webcast that it would be rare for
FASB to decline to endorse an exception recommended by the PCC because
the board will be working with a FASB liaison in a collaborative process.

She compared the relationship the PCC will have with FASB to that of
the Emerging Issues Task Force (EITF) with FASB. The EITF assists FASB
in identifying, discussing, and resolving issues that emerge within
FASB’s financial reporting framework.

“There have not been any instances in EITF history where the board
didn’t actually endorse one of their standards, so I think that it
sort of speaks for that collaboration that occurs,” Cosper said.

FASB is seeking public comment through Oct. 31 on the Private
Company Decision-Making Framework it is developing to determine when
it is appropriate to seek GAAP exceptions for private companies. In
its Invitation
to Comment, FASB’s staff made recommendations that seek to
provide a method for reducing cost and complexity where appropriate
without adversely affecting reporting of information that would be
important to users, but FASB has not yet deliberated on them.

“There is a focus and a leaning toward user-relevant
considerations,” FASB Project Manager Michael Cheng said during the webcast.

The proposed framework would allow consideration of GAAP differences
in recognition and measurement based on responses to a series of
questions about user relevance, cost, and complexity. Disclosure
exceptions likewise would focus on relevant information at reasonable
costs. Exceptions in display may be permitted under the proposal after
consideration of whether substitute disclosure would be sufficient
without fundamentally affecting comparisons with public company
financial statements.

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